UK: Court decision should help rebalance ‘hard’ and ‘soft’ Brexit expectations – MUFG

Derek Halpenny, European Head of GMR at MUFG, suggests that yesterday’s decision to force the UK government to seek parliamentary consent before triggering Article 50 was certainly a blow for the government but also intensifies Brexit uncertainty which could be viewed as being a negative scenario.

Key Quotes

“Firstly, this does not derail Brexit but it certainly does place some doubt over Article 50 being triggered by the end of March 2017.

This of course might come to nothing given the government is appealing to the Supreme Court. That said, a brief discussion with a legal expert yesterday, suggests to me that the government’s task in overturning this decision will not be easy. If they did fail, that would leave 3-4mths to seek parliamentary consent for trigger Article 50. That might be achievable. Firstly, every sitting MP in parliament knows they are only there because of their constituents – the majority of who voted for Brexit. According to one study online (medium.com), 421 out of 547 English and Welsh Westminster constituencies probably voted to leave the EU, or 73%.

But the timing of triggering Article 50 certainly looks under threat if parliament for whatever reason defied the government’s attempt to invoke Article 50. Market participants are assuming PM May would quickly call an election. But an important question there is – can she do that? Legislation implemented by the last government – the Fixed-term Parliament Act 2011 - means a two-thirds majority is required or a no-confidence vote would be required with nearly 100% of Tory MPs required to vote down the government.

I could go on but I won’t. The clear conclusion for now though is that this court decision throws up a number of uncertainties that could be deemed as negative depending how circumstances develop. But a reasonably safe conclusion for now is that the court judgement will help to rebalance expectations between ‘hard’ and ‘soft’ Brexit. More parliamentary involvement lessens the power of the key Brexit members of government – Boris Johnson, David Davis and Liam Fox. That will help dilute the key recent driver of pound selling.”